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Mixed Market Fundamentals Keep Pressure on Latex Pricing

Published on 2004-07-27. Author : SpecialChem

 

Horgen, Switzerland -- Rising raw material costs combined with soaring energy prices continue to put intense upward pricing pressure on Dow Latex, the latex business of The Dow Chemical Company.

"While we see firmness in latex demand and increasing tightening of raw material supply, we are dealing with continuing volatility in oil pricing and energy costs and, consequently, unusually high feedstock prices," says Horacio Percossi, Vice President, Dow Latex. "The impact of these mixed market fundamentals has created a new paradigm for raw materials pricing in every region. As a latex producer, Dow can no longer absorb the increases in raw material costs and must work to restore margins to ensure that we can continue to meet customer needs in the future."

Harriman Chemsult Ltd. characterized the market challenges facing latex producers citing "the unprecedented run up in feedstocks and monomers combined with the unreliability of predictions on monomer price developments. They [latex producers] are struggling to bridge the gap between feedstock costs and market selling price, leaving them with a negative deficit." The report continues, "Unlike previous cycles in styrene pricing there has been no relief period of lower prices to provide producers with an opportunity to rebuild margins. The cycle has been unusual in that the price of butadiene is moving up simultaneously with styrene."

Percossi explains, "Styrene and butadiene account for a large portion of our costs in emulsion polymers. Continuing raw material increases impair the ability of this business to invest in the necessary technical resources. It is critical that we build greater flexibility into our pricing structure so we can respond promptly to market changes and meet market needs in the long-term."

In Europe, extremely tight supply conditions for styrene, butadiene and butyl acrylate, and the move from quarterly to monthly styrene pricing are major factors in the pressure on Dow Latex prices, whilst in North America, the prices of oil and natural gas have been rising at unprecedented rates over the past three years. Natural gas prices have increased from the historic norm of $2 per MMBTU to $4-6/MMBTU range. In Asia, rapid growth in demand and multiple raw material shortages add to the competitive environment and local pricing pressures.

Percossi is optimistic about long-term market growth and Dow's Latex business and points to Dow's recent decision to more than double the size of its latex plant in Zhangjiagang, China, to a capacity of 48,000 mt/year. The expansion is scheduled to start up in 2H 2005 and will serve the domestic paper and carpet industries.

Percossi heads the Dow Latex Global Business Unit, including the Emulsion Polymer and UCAR* Emulsion Systems businesses. Prior to assuming this post in January, 2004, he was Commercial Director for Chemicals and Performance Chemicals in Europe. Percossi joined Dow in 1973 in Buenos Aires, Argentina, and has held positions in several businesses (Dow Agrosciences, DowBrands, STYROFOAM* products, Chemicals, Performance Chemicals) in locations across Europe and the Americas. He serves on the CEFIC Specialty Chemicals and International Trade & Competitiveness Programme Councils.

Dow is a leader in science and technology, providing innovative chemical, plastic and agricultural products and services to many essential consumer markets. With annual sales of $33 billion, Dow serves customers in more than 180 countries and a wide range of markets that are vital to human progress, including food, transportation, health and medicine, personal and home care, and building and construction, among others. Committed to the principles of sustainable development, Dow and its approximately 46,000 employees seek to balance economic, environmental and social responsibilities. References to "Dow"or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.

Source: : Dow Chemical


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